captioning sponsored by macneil/lehrer productions >> woodruff: good evening. i'm judy woodruff. president obama today wound up a three day four-state campaign swing to rev up his supporters for the midterm elections just five weeks away. >> brown: and i'm jeffrey brown. on the "newshour" tonight: we look at a key group in the president's winning 2008 coalition: younger voters and where they stand this time around. >> woodruff: then, ray suarez has the latest on a suspected mumbai-style terror plot in

europe and the possible threat in the u.s. >> brown: margaret warner examines china's growing economic and military assertiveness in asia and globally. >> they're breaking diplomatic egg which is three or four years ago they would not have broken. so i think the change is palpable. >> woodruff: we talk to former clinton administration secretary of labor robert reich-- the last in our series of conversations on extending the bush-era tax breaks. >> brown: and jonathan miller of "independent television news" reports from northwest pakistan, where relief-aid is still slow in coming two months after the floods began. >> this is one of the worst affected areas in pakistan, but these people industrial no safe water, no food, no shelter, no medicine. something has gone very wrong. >> woodruff: that's all ahead on tonight's "newshour." major funding for the pbs newshour has been provided by:

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to get engaged. ( applause ) thpresent began his day in the back yard of a family in des moines, iowa, the state where he won his first victory in the 2008 campaign. the official topic was the economy, but the overriding message was: keep democrats in control of congress and don't let republicans turn back the clock. >> when you look at the choice we face in this election coming up the other side, what it's really offering is the same policies that from 2001 to 2009 put off hard problems and didn't really speak honestly to american people about how we're going to get this country on track over the long term. >> brown: it was the latest in a series of events aimed at re- creating the energy among

democrats generated by then- candidate obama. >> hello wisconsin, i don't know about you, but i'm fired up. >> brown: last night, before a crowd of almost 26,000 at the university of wisconsin, the president tried to galvanize young voters, one of the groups that democrats desperately need these days. >> the prediction among the pundits is this is going to be a bloodletting for democrats. that's what they're saying in washington. and what they're saying is and the basis of their prediction is that all of you who worked so hard in 2008 aren't going to be as energized, aren't going to be as engaged. they say there is an enthusiasm gap and that the same >> brown: the president also used stronger words this week to make his point. he told "rolling stone" magazine that disaffected democrats need to buck up. >> it is inexcusable for any

democrat or progressive right now to stand on the sidelines in this midterm election. that people are sitting on their hands complaining, is just irresponsible. >> brown: on monday, in new hampshire, vice president joe biden went further. he said democrats need to remind their base to stop whining. still, some libel bloggers-- like jane hamsher of firedoglake.com-- warn the president is running a risk, in scolding his own supporters. >> he is telling voters on the democratic base that they are irresponsible. that you know they're slackers, that they don't care enough to show up. and it's really... it really could depress democratic turnout in the fall. >> brown: today, though, a new n.b.c./ "wall street journal" poll suggested the obama-biden message may be having an impact. it found that among likely voters, 46% want republicans running congress to 43% for democrats. the republican lead had been nine points in the same poll

just three weeks back. but at the u.s. capitol today, republicans said they think americans are ready for change. senate minority leader mitch mcconnell: >> they've watched a governing party that was more or less completely uninterested in what the governed had to say about the direction of our country. and our friends on the other side focused on preserving their own jobs, and spending more taxpayer dollars. it has to stop. >> brown: in the meantime, the president meets with top congressional democrats tomorrow, for one last strategy session as lawmakers head home to campaign. >> woodruff: coming up, we continue our election year coverage and zero in on the youth vote. after that, we look at the terror plot in europe; the rise of china's military and economic might; the debate here at home over extending tax cuts and pakistan's flood victims still in need of aid. but first, the other news of the day. here's hari sreenivasan in our newsroom. >> sreenivasan: the u.s. house staged a proxy fight over

extending the bush-era tax cuts today and democratic leaders won by a single vote. they moved to adjourn without acting on the tax cut issue, but republican leader john boehner appealed for a vote now. 39 democrats joined with the republicans, and in the end, the motion to adjourn barely passed, 210 to 209. the tax cuts expire in january. a wave of labor protests swept across europe today. their target: austerity plans that have cut public spending and pensions and raised taxes. in spain, the first general strike in eight years gathered force before the sun was even up. protesters worried about preserving jobs and wages tried to stop buses from leaving the main depot in madrid. >> this general strike is against making firing people easy and cheap. in the last three years two million jobs have been destroyed. >> sreenivasan: the main spanish trade unions claimed ten million people-- more than half the work force-- were striking. but the labor minister said only 7% of civil servants and 20% of

transport workers took part. as the day wore on, chaos erupted in the streets of barcelona. a police car burned as riot police tried to curb the mayhem. in brussels, belgium, as horns sounded, some protesters tussled with police. organizers estimated turnout at 100,000, and overall, the marches were peaceful. amid the protests, the european commission met in brussels, and called for penalizing nations that run up too much debt. the penalties could total billions of dollars. >> i see it as a way of reinforcing the mechanisms of democracy in europe because what happens, very often, is that politicians escape some of the obligations they have towards their own public or their own parliaments or even sometimes the legislation. >> sreenivasan: but labor leaders warned the result will be even deeper pay and pension cuts and they argued big banks should be the ones to pay.

>> with regards to what the commission has just announced on sanctions, it proves that the european commission, as well as states, have not understood anything. it just proves to the workers that the national governments and the commission are just at the beck and call of the financial markets. >> sreenivasan: the protests against existing austerity measures extended as far south as greece where transportation ground to a virtual halt and as far north as ireland, where one man blockaded the entrance to the irish parliament with a cement truck. workers in portugal, italy and lithuania also took part in strikes. the protests in europe raised new concerns on wall street. it was enough to force a pause in the stock market's september rally. the dow jones industrial average lost more than 22 points to close at 10,835. the nasdaq fell three points to close at 2,376. china has won a major trade fight with the u.s. the world trade organization ruled today that an american ban on chinese poultry parts is illegal.

the ban was imposed five years ago after an outbreak of bird flu in china. the w.t.o. ruling is subject to appeal. the u.s. placed eight iranian officials on a financial blacklist today. they're accused of severe human rights abuses following the disputed presidential election in iran last year. the regime cracked down after the opposition charged that the outcome was rigged. secretary of state hillary clinton said today the eight officials presided over beatings, torture, rape and murder. >> we will serve as a voice for the voiceless and we will hold abusive governments and individuals accountable for their actions. this is the first time the united states has imposed sanctions against iran based on human rights abuses. we would like to be able to tell you it might be the last, but we fear not. >> sreenivasan: the financial blacklist includes the commander of iran's revolutionary guard corps, among others. jury selection began today in new york for the first guantanamo detainee to be tried in a federal civilian court.

ahmed kalfan ghailani was allegedly an aide to osama bin laden. the tanzanian man is charged with plotting to kill americans in the bombings of two u.s. embassies in africa. 224 people died in the 1998 attacks, including 12 americans. if convicted of the charges, ghailani could face life in prison. 19 people in britain are accused of stealing more than $9 million by hacking into online bank accounts. scotland yard took the 15 men and four women into custody on tuesday. they're suspected of infecting thousands of personal computers with viruses that collected customers' account log-in information. police said the total amount of stolen funds could keep rising, as the investigation intensifies. former president jimmy carter will spend a second night hospitalized in cleveland. he was admitted for stomach problems on tuesday, after taking ill on a flight from atlanta. hospital officials would not discuss his condition today. instead, they said doctors wanted to keep him under observation for another 24 hours. those are some of the day's major stories.

w, back to judy. >> woodruff: and back to campaign 2010. it was no accident that the president was scheduled to headline a rally for young voters at the university of wisconsin last night. he'll do it again in columbus, ohio, in a few weeks, another key college town in a battleground state. 18 to 29 year olds were a critical component to barack obama's victory in 2008. and, if history is a guide, they are some of the most likely voters to fail to show up at the polls for a midterm election. 18% ofhe electorate according to exit polls. but in the 2006 midterm election, young voters only made up 12% of the electorate. and since they voted overwhelmingly for democrats in both of those elections, the potential for a significant drop in their participation has the president out there courting their votes. to discuss the battle for the youth vote and its potential effect this election season, we are joined by michael dimock, associate director for research

for the pew research center. heather smith, executive director of the group "rock the vote" and elizabeth murphy, editor-in-chief of "the daily collegian" at penn state university. thank you all three for being here. liz murphy, i'm going to start with you because while the president was in wisconsin, vice president biden was at penn state yesterday. tell us how engaged students seem to be this year, this fall. >> well, about 1,500 people went out to the event yesterday and about 200 or 300 were in an overflow room for joseph biden. so he was all over campus, people were watching for him, looking for the cars coming in and out. it was definitely a sight to see yesterday. i do think, however, it might have been an isolated incident. this time in 2008, you know, we had people coming up to you asking if you registered to vote

once or twice a day walking to class. it's just not as prevalent on campus this year. >> woodruff: but you're saying they did turn out for the vice president, there's just not the activity that there was two years ago? >> correct, yeah. we have a good amount of groups who are very much engaged and energized, but in terms of the midterm election, i'm not sure there's going to be as much for a fervor or engagement with campus at large . >> woodruff: heather spit, rock the vote. you travel all over the country not look looking at students across the campus but in general. what are you seeing? >> as elizabeth was saying, it's not 2008. this isn't a presidential election year. you don't have a national election, the national media and all the visibility and the tens of millions of dollars that comes with that. but it's a midterm and what we're hearing from young people is that they want to participate. they want to be spoken to. they want the candidates to come

to their campuses, to their communities and address them directly because, you know, they're living their lives and their lives are very real and there's very real issues and there's an opportunity for leadership and to engage them. again, it's not a presidential election . >> woodruff: how does this level of interest and engagement, michael dimock, compare with previous midterm election years? >> you have to remember that 2006 was a high engagement midterm and it was relatively high among young people as well. young people told us for a midterm they were interested in what was going on. that was their reflection of the views of the bush administration, wars in afghanistan and so forth. this year, you're seeing some dropoff from that. young people, only 30%, tell us they've given a lot of thought to this election. that's down from the high 30s at a comparable point. but a bigger difference is that older folks are more engaged this year. they're up. and so if the young folks aren't rising with that tide, the disparity grows and they make up

a smaller share of the people who show up on election day. >> woodruff: liz murphy, from your perspective, again, penn state and pennsylvania as much as you can tell, what are young people talking about? what are the issues on their mind? >> i think the biggest thing that's being talked about on campus is the job market. you know, we're paying thousands of dollars to go to school for four years plus to find a job. no one wants to go back to mom's basement after grabbing their degree. so i think that's something that people really want to see a solution and an answer to. you know, where am i going to get a job after i graduate? >> woodruff: heather smith, that's got to be the story across the country. >> it is everywhere. one in five young people, teenagers and those in their early 20s are unemployed. those who went and graduated from college last year, 81% of them graduated without jobs. i mean, we're hearing not just

even fm the low-income community but even the middle-class and the upper class. these young people who... there's this guy joey i just met in florida, he's the varsity soccer captain, he was in all honors classes, he graduated with 3.4 g.p.a., he volunteered in his community, did everything right. he graduated and didn't have a job, it's a year and a half later. to me this is a bigger problem than what share of the electorate they'll make up. it's how are we going to address these issues of youth in america, young people in america. >> woodruff: and michael dimock, pull that information into what you're seeing in terms of what young people say about what they think about president obama and what they say about the democratic party and the democratic message. >> right. what's remarkable about young people is in many ways they are taking this brunt of this this economic downturn, especially in the job situation, yet they remain remarkably resilient. their level of optimism is far higher than what we see among older folks. 40% tell us they're satisfied

with the state of the nation. that's double what it is among people 30 and over. and they're not really rejecting obama. most still tell us they approve of obama. most think the health care bill was the right thing to do. more tell us his policies are helping the economy than hurting it. so this isn't a disillusionment with obama that's... or the democratic party that's driving this. i think it's just a sense that this election the case hasn't been made this election is really important to younger voters yet. they don't say it at the same rate older folks do. >> woodruff: liz murphy, how would you respond to that? how important do you think young people see this election? and how do they respond to the president's admonition yesterday that young people need to understand it's important and he said in that interview with "rolling stone," inexcusable to sit this election out. >> i think it's unfortunate, but at least at penn state's campus there isn't this huge feeling that people need to head out and

hit the polls and, you know, make their voice heard and vote. in 2008, there were two-hour wait lines to vote when obama came to speak it was like a mini woodstock ouide of our administration building. people walking around on the grass and listening. entirely engaged in whatever he was saying and totally believing that they needed to be heard. right now i don't know that students are so interested in voting. a gubernatorial candidate democratic side in pennsylvania went to penn state. i don't know how many penn staters would actually knee if you asked them right now. if f they did, i'm not sure they would go out and vote. >> woodruff: interesting. and heather smith, what about... what's your sense of what the reaction would be broadly to this scolding, admonition, you've got to get out there, it's inexcusable not to.

>> well, i think there's a little bit of excitement that the president is talking to them again. but also a little bit of skepticism going "where were you for the last two years?" i think people got engaged in '08 and worked really, really hard because these issues are real, they do believe as a generation they can change this country and change the world. they have that optimism. and he pointed a path forward to do that. he said these issues are real,s here what we can do and here's how you can participate. and afterwards they felt like where did our leader go, right? what can we do? and so i think that they can be reengaged, reenergizeed. but someone needs to push that path forward. >> woodruff: what about that other large voice out there, michael dimock, that we're hearing this year. on the right, the tea party. do we have a sense yet of how that's resonating or not with young people. >> it's not resonating that much. it's not a movement that's really engage add lot of young people.

it's predominantly a movement of 50 and over americans and it's a wide swath of people in that age range but it hasn't really reached among younger voters very much. >> woodruff: liz murphy, at penn state, hear much discussion from republicans, number one, but number two from the tea party in particular? >> i agree with michael. there's not much talk on campus from students about the tea party movement at all. it's definitely in the community, but like he said it's more of an older generation. there is a republican feeling among campus as well. we have college republicans who are very vocal. but overall the tea party movement really hasn't taken hold. >> woodruff: heather smith, sum it up for us. whether you're the democratic party or the republican party or the tea party, what do you need to do now to get young people excited between now and november 2. there's a real opportunity. they want to participate. they want to be engaged.

you saw 26,000 people show up madison, wisconsin, last night. that's 10,000 more than came out to the rally in the exact same place during the 2008 campaign. there's a real frustration with the issues that are real in their lives. there's an opportunity to engage them and make the politics and the politicians really lead them forward on a path that provides real solutions and is not about excuses and not about political parties but about how they can improve their lives. and i think if you go out and talk to them, they will respond. >> woodruff: all right, we're hearing it here. heather smith with rock the vote, michael dimock with the pew research center and elizabeth murphy at penn state. thank you all three. >> brown: now, new terror threats have governments around the world responding. we begin our coverage with a report from london from angus walker of "independent television news."

>> reporter: just ten armed men managed to kill 164 people, terrorizing mumbai for three days in november, 2008. the attack targeted well-known buildings like the taj mahal palace hotel. the militants were heavily armed and well trained. they took hostages and got worldwide publicity. for some time, m.i.-5, based here if stall london, has been one of the western intelligence agencies tracking a plot to carry out coordinated mumbai style attacks here in the u.k., france, and germany. i. t.v. news understands that david cameron was shocked when he was told about the threat early in the summer. this video claims to show german-born terrorist recruits training in northern pakistan. according to u.s. sources, a german suspect arrested in kabul has been the source for much of the intelligence about the threat. 20 drone attacks aimed at al

qaeda commanders in the north of pakistan so far this month have been aimed at killing those behind the plot. if europe, there have been frequent recent security alerts. the eiffel tower evacuated twice in two weeks and here plans have been drawn up to deal with specifically a mumbai-style attack. >> brown: ray suarez takes the story from there. >> suarez: siobhan gorman joins us. she has been covering this story for the "wall street journal." in your reporting, what have you found out about what kind of attacks were contemplated and how far along they were in the planning. >> well, what i've been told is that the leading theory is that we would be looking at these mumbai-style attacks where you'd have armed gunmen going at perhaps multiple targets, so-called soft targets, hotels or subways or things like that. and i was told they were sort of in the early planning stages where there were people on the ground trying to get things

rolling . >> suarez: all the countries involved that have been mentioned, france, the united kickdom, germany, worry, do they, that not all the active plans may have been rolled up? that there may still be cells out there? >> yeah. my understanding is that there's still quite a bit of activity on the ground from law enforcement and security officials in europe to try to not only get their arms around the plot but also see if there are suspects that they need to arrest. >> suarez: has there been any connection to the united states? >> u.s. officials are looking at that. my understanding is that right now the evidence really primarily points to europe. but they are very concerned and people i was speaking with as recently as yesterday and this morning say that u.s. counterterrorism officials are still trying to run down any lead that might go into the united states because they're very aware that they have incomplete information about this particular plot at this point. >> suarez: as you heard in the taped report from itn, they

identified a german-born suspect who's being held somewhere in the region as a primary source. are there others? are there other sources for existence of these plots? >> there are. and i was actually cautioned that this german detainee isn't necessarily the main source of it all but he's one of many sources and i mean there have been communications, intercepts and all of the other kinds of traditional intelligence that you'd gather when trying to sort through a plot that have gone into the development of their understanding so far . >> suarez: there's been an increase in the mber and frequency of strikes carried out by unmanned aerial drones in pakistan. is this in any way connected with this attempt to foil the plots? >> indeed, it is. when u.s. intelligence officials started to learn about some of the contours of this plot and they saw connections back to the tribal regions in pakistan, one of the things that they decided to do was to disrupt some of the planning efforts that were going

on if pakistan by aiming drone strikes at some of the people that they thought might be involved in the planning of those attacks. and so what we've actually seen is what appeared, actually, to be record levels, monthly levels, of drone strikes in pakistan this month if we're looking at more than 20. and the last high was 12 in january. >> suarez: wasn't it the strikes that got you thinking about whether there was something more connected to this? >> indeed it was. when i was talking with my sources, i saw that there had been this surge in strikes and i spent a couple weeks, actually, trying to figure out what it was that was behind that and i kept getting answers that suggested that there was more of a story there. and it turns out there was. >> suarez: now, foiled attacks are often discussed with the public in part to show the public that there's still a danger and that the government involved is still working to make sure these things don't happen. was this talked about earlier in the timeline than any of the

intelligence agencies involved would have liked? >> my sense is yes. i mean, i haven't been told... well, no one's said that explicitly, but a number of people have said today both on the european side and on the american side that they're not really eager to talk about the nature of the plot or theories about how it might be carried out because they don't have it rolled up yet and they don't want to do something that could excel rate it or something like that. >> suarez: when there is something discovered like this. when there is a sense that it may not be fully foiled, what happens in european capitalses? is there an outward sign? an obvious sign? was there anything happening in the united states to show that there may be something that we're trying to defend against? >> i don't know for sure in europe, but i did see some reports about stepped-up physical security at key places in the u.k. we did see these bomb scares that happened at the eiffel

tower. it sounded like those didn't turn out to be real so it's not clear if they're really connected or if it just reflects a heightened level of alert in france, for example. i don't think that there have been any outward examples in the u.s. really what i've been told is that intelligence and law enforcement officials are just going through any information that they might have that might link up either people or plans or behaviors between the european plot and the u.s. >> suarez: siobhan gorman, thanks for talking with us. >> thank you. >> woodruff: next, china flexes its growing economic and military power. and that flexing brought results over the weekend when japan yielded to chinese demands and released a trawler captain. margaret warner has our report. >> reporter: the chinese fishing captain came home to a hero's welcome this weekend-- three weeks after he was arrested by the japanese coast guard in disputed waters.

>> ( translated ): the diaoyutai islands are a part of china. i went there to fish. that's legal. those people grabbed me, that was illegal. >> reporter: he'd been captured after colliding with two japanese patrol boats in the east china sea. that's an area rich in gas deposits around a string of uninhabited islands with rival names called the diaoyus in china and the senkakus in japan. the seizure sparked a test of wills between asia's traditional economic and military power, japan-- and its rising one, china. china didn't to hesitate to threaten, and use, its clout. >> ( translated ): china will take strong countermeasures, and all the consequences will be born by the japanese side. >> reporter: beijing's countermeasures took aim at the heart of the japanese economy. china blocked exports to japan of so-called rare earth elements -- key components of high-tech manufactured items from iphones, wind mills and computer hard

drives to sophisticated military equipment. china controls an estimated 97% of the world's current market in these rare earth elements. >> frankly, these stories about the rare exports being held up to japan is a kind of leverage that i thought went out with the cold war 20 years. so i would characterize it as a harsh reaction, unnecessary in terms of the japanese overall goodwill toward china. >> reporter: reagan era defense department official michael pillsbury says he was surprised by china's move. >> the old school of thought about china was that they would be modest in their rise as a world leader. they would not provoke difficulties with other countries, just bide our time and build up slowly. that was xiaoping's guidance for a long time. so it's a surprise to see them be this assertive, shall we say,

on the world stage. >> they're breaking diplomatic eggs which three or four years ago they would not have broken. so i think the change is palpable. >> reporter: clinton-era national security council official ken lieberthal thinks china's reflects its sense of its growing might. >> they're stronger economically and they're stronger militarily. and there's pressure within china to revisit issues of longstanding concern to china and see if they can move the needle with other countries around the region. the chinese navy in particular has grown much stronger. they are pressing to have the government back fairly assertive territorial claims. and to let the navy be fairly on balance, not very good news for the region. >> reporter: china and its rapidly expanding navy are also laying claim to swaths of the south china sea and islands, over the protests of neighbors like vietnam, taiwan, brunei,

malaysia and the philippines. the area hosts crucial shipping lines rich oil and gas deposits. >> reporter: but it is china's economic muscle that makes it most formidable. this year it overtook japan as the world's second largest economy built on inexpensive manufacturing, cheap exports, and a growing market at home. its economy grew nearly 9% last year in the midst of a global recession. free of debt, with plenty of cash, china has been gobbling up natural resources it needs to sustain its pell-mell growth from countries around the globe. from brazil-- which china loaned billions in return for access to its oil reserves; to sudan-- where china refines its oil in return for a hefty percentage; to afghanistan-- where china is developing the war-torn country's copper reserves. u.s. policymakers are also struggling with china's more assertive role. the u.s. has been trying for years to get the chinese

government to stop undervaluing its currency, the renminbi, to make chinese exports artificially cheap. president obama raised the issue again today in iowa. >> the reason that i'm pushing china about their currency, it's because their currency's undervalued. and that effectively means that their... the goods that they sell here cost about 10% less. they are managing their currency in ways that make our goods more expensive to sell and their goods cheaper to sell here. >> reporter: but so far, despite promises, beijing has done little. today, the house tried to take matters into its own hands, passing a bill authorizing punitive tariffs on chinese imports if beijing doesn't act on the currency front. but the bill's prospects in the senate are cloudy. today the house was poised to lieberthal predicts this threat, like earlier ones from washington, will have little effect. >> we've done that for years, and we've never followed through. so i think in china now it is

hard for people internally to make the case that the us is serious and not simply crying wolf. how you gain credibility on that is not quite clear because we don't want to have a trade war. >> reporter: the u.s. also needs china as a partner in tackling thorny global issues like iran and north korea. president obama tried to walk that line when he met with chinese premier wen jiabao at the united nations last week, with encouraging words in public. >> the world looks to the relationship between china and the united states as a critical ingredient on a whole range of security issues around the world. >> reporter: but when the doors closed, president obama bluntly expressed his disappointment in beijing's failure to act on the currency issue and warned of trade actions if it didn't. the u.s. is also pushing back with a stronger diplomatic role in the region at the request, u.s. diplomats say, of china's nervous neighbors.

in new york last week, president obama met with leaders of the asean, an asian security organization, a group in which china is not a member. and he plans another trip to asia in november-- this time to indonesia and india. michael pillsbury says china is taking a gamble with its new boldness. >> you have a number of thoughtful chinese intellectuals already cautioning the chinese leadership not to go too far, not to create coalitions of other countries, hostile to china, that will cooperate. that is the chinese nightmare. if india, russia, vietnam and the united states and the other countries coordinate a policy toward china, and decided to control china's rise, and to prevent them from becoming the leader of the world, this would be the kind of nightmare that china is worried about, from its own history. >> reporter: lieberthal thinks some in the leadership see the risks.

>> i think the chinese are smart enough to see they're creating their own problems here. i've had very high-level chinese officials ask me why is the u.s. changing its policy in asia? and my response to them very simply is we aren't, you are. and your policy changes are requiring that we take some compensatory measures. and if you don't want to see that happen, stop moving in the direction you're moving. >> reporter: in the last 24 hours, without any announcement, china lifted its ban on the export of rare earth metals to japan. >> brown: and to the last in our series of conversations about whether to extend the bush-era tax cuts. we've heard a range of views from economists glenn hubbard and laura tyson as well as former fed chairman alan greenspan. tonight, we turn to robert reich, professor of public policy at the university of california, berkeley. he served as labor secretary in

the clinton administration. his new book is "aftershock: the next economy and america's future." welcome to you. >> hi, jeff. >> brown: now, you were against these tax cuts from the beginning so nine years later, what's your view on how much they've helped or hurt? >> well, i think they hurt quite a lot. the original bush tax cuts of 2001 and 2003, remember, were so ed to america as a way to revive the economy and also create a lot of jobs and generate a lot of wage growth. well, actually, if you look at the record between 2001 and 2007, the so-called bush recovery, there were very few jobs even the widest and broadest and most generous estimate is about ten or eight million jobs relative to the 22 million jobs created under the clinton administration and beyond that, median wages, jeff, actually dropped between 2001 and 2007.

adjusted for inflation, the median worker actually grew poorer. there was no trickle down at all. >> brown: so when we get to now and the question of what to do about them or let them lapse, you're for letting them lapse at the top end for the wealthiest but not for the majority of people? >> yes. i think that we aren't in a deep recession. technically we're out of the great recession but obviously the aftershock of this recession continues. we ought to provide at least middle-class people with as much benefit as they can. why raise taxes now? but people at the very top, they tend to save much more of their income than people in the middle. they don't spend nearly as much, therefore there's not much bang for the buck in terms of giving them an unwarranted and unexpected extension of the bush tax cuts. also, remember, people at the top, if they did get that one-year extension that they did not expect, that would put a

huge hole in the budget deficit that apparently and i think justifiably many people-- republicans and others-- are very concerned about. in fact, millionaires and millionaire families would get next year if the bush tax cut were extended $31 billion that could otherwise be used to, say, save the jobs of teachers or police officers or firefighters who would use their money, who would spend it, and whose jobs are very important. >> brown: well, but when you argue for keeping the middle-class tax cut, is that an economic argument at this point or a political argument? because you've just made the case before that these tax cuts, you think, didn't do that much in the first place. >> well, it's important to keep them. i don't think the tax cuts originally did trickle down. at least the tax cuts that went mostly to the rich. but the portion of the tax cuts,-- again, not a large portion, but a portion of the bush tax cuts that went to the middle-class and the lower

middle-class and the working class-- i say keep them. it's not going to have a huge impact on the spending patterns of most people because, as you said, as i suggested before, they didn't get very much out of the bush tax cuts. but nevertheless, why raise taxes on them to begin with? let's give them every dollar that they possibly can get and there's no reason to reduce their spending. after all, the spending of the middle-class and america's working class, people who are going to spend almost every dollar they have these days, that spending is terribly important to keep the economy going. >> brown: well, one reason to let them lapse for the middle class, the argument was made by alan greenspan on the program a few days ago. he supported them originally but now he argues that we just can't afford them. he was citing the potential catastrophe of the debt problem where the government is no longer able to pay for what it wants to do. >> well, jeff, undoubtedly there is a tradeoff between in the short term providing as much stimulus to spending,

particularly middle-class and working-class spending as possible and then over the long term dealing with that long-term budget deficit. but i think the best compromise and the best balance here is to let those bush tax cuts lapse for people at the top who, again, they don't need it, they save much more of their income than people in the middle. it's not a huge burden on them. remember, all the lapsing of the bush tax cuts means for people at the top is that they would go back to the clinton era marginal income tax of 39% and a 20% capital gains tax. remember, under bill clinton the economy did very, very well. people tend to think, oh, horrible that we would subject the richest americans to the marginal tax rates under bill clinton. well, again, the economy was very prosperous in those days. with regard to the middle-class, though, let's not raise their taxes. not right now. >> brown: well, several of our previous guests in this series have talked about putting...

thinking in terms of the bush-era tax cuts in terms of reforming the tax code more broadly. and i know that in your new book you talk about that. but it sounds like you want to go even further, to have it, in fact, raising the top end quite dramatically. up to 55%. >> yes. what we tend to forget when we talk about taxes is that most middle-class, working class people are already taxed enormously. the sales taxes in most states have gone up. the taxes that we call payroll taxes, that deal with social security and unemployment insurance, those payroll taxes, f.i.c.a., have actually gone up. 80% of american workers pay more in payroll taxes than they do in income taxes. so why not, i have suggested, exempt the first $20,000 of income from the payroll tax and make it up by putting the payroll tax on incomes over $250,000.

in other words, many long-term issues, jeff, that have to do with fairness of our tax system. and the tax system is hardly fair. we right now, we have a multimillionaires who are able to treat much of their income as catal gains, subjected to now a 15% income tax. well, that's ridiculous. i mean, that's unfair. that's lower taxes than people earning $30,000 are paying. >> brown: in our last minute, you canner that objections to that, the same ones we're hearing right now from republicans and some democrats that that would hurt small businesses, that would hurt the investors, the very people who potentially can get economic growth back again. >> well, let me emphasize, number one, small business leaders were not hurt during the clinton years where the clinton marginal tax rate on the top earners was 39%. secondly, only 3% of small business owners have incomes

over $250,000 and would be affected in any event. thirdly, we're only talking about the marginal income tax. that is only their incomes over $$250,000 would be affected. anything under $250,000 would actually be subjected to a lower tax rate than they had before. the other thing to note, jeff, is that when republicans and others who don't want to go back to the clinton tax rates talk about small businesses, they fail to acknowledge that most of the really very wealthy small businesses, the ones that are earning a lot of money, those are really individuals. they are investment bankers or they are doctors or lawyers who have registered themselves and they talk about themselves and they also file income taxes as if they're businesses. and that's good for them in terms of their tax rate, but they don't generate a lot of jobs. these are not mom-and-pop stores or mom-and-pop factories.

these are very high-paid professionals. so there's no reason that they should be subjected to another year... no reason they should get another year of the bush tax cut that was really designed-- and everybody expected it would be only ten years. >> brown: all right. robert reich, his new book is "aftershock" thanks very much. thanks for talking to us. >> thanks, jeff. >> woodruff: finally tonight, it's been two months since flood waters devastated pakistan killing more than 1,500 and leaving as many as six million homeless. jonathan miller of "independent television news" has covered the disaster from the start. in tonight's report, he revisits a town on the swat river, where many are still in desperate need of help. >> reporter: northwest pakistan's drying out now, post- deluge.

parts of it look like a war zone. tens of thousands have been uprooted. we've come back to see what difference the hundreds of millions of pounds pledged in flood aid has made to their lives. shortly after the flood hit, we went to chek hisara, a village leveled by the raging swat river. 5,000 people were perched in a forlorn, makeshift camp on some high ground, hungry and desperate. no one, they told me, had come to their rescue. the rain may have stopped now but the camp looked just as it did when we'd left it. they'd found some more u.n. tents, but the u.n. hasn't actually been here they said and neither, they insisted, had anyone else apart from an islamist charity which provided some food for a while. the man in the green here lost his wife in the flood. she was swept away and he never even found her body. but all of these people here have suffered terribly. they've all lost their homes and they're living in this really

grim tented encampment. the trouble is that in the six weeks that have elapsed since we last visited here, nothing has changed at a and these people have had nothing from anyone. the lady beside me runs a charity for women. she's unimpressed with her governments aid efforts. >> ( translated ): the problem is the international community doesn't trust the pakistan government and the pakistan government doesn't trust international charities, so that's why these people are suffering. they need to co-operate with each other. there is too much talking. >> reporter: this is one of the worst-affected areas in pakistan, but these people still have no safe water, no food, no shelter, no medicine. something has gone very wrong. on sunday the 8th of august, we'd turned off the main road through charsadda and entered a district called hasinabad. >> my name's jonny... >> reporter: back then, salim khan told me no government officials or relief workers had been there since the flood.

with his son, anwar, he'd shown me his wrecked house. at least you don't squelch your way down the alleyway now. salim says he's rented a nearby house for his family. the site of his old house: abandoned. salim has no money to rebuild and no job. outside the mosque, i met salim's son, anwar. he told me two british charities had provided some aid here. down the road, there's mazhar mahmoud. he said an islamist charity had been here too. and i recognized these two: afsheen and iqra, daugthers of fazal the grocer. i go in to say hello. this was the state of fazal's house last time we'd come. the family were camped on the roof. they'd had a dramatic escape from the torrent which had crashed through hasinabad and were thankful to just be alive. this was the state of fazal's house last time we'd come. the family were camped on the

roof. >> ( translated ): we lost so much. we don't even have the basics. it's been a terrible time but the lesson was that almighty allah promised to provide, and he has. >> ( translated ): the school wants the girls to go back but the problem is we don't ve the money to even buy them new books and bags. >> reporter: i asked nine-year- old afsheen if she missed school. she said terribly. and then she just sort of crumpled. her dad said she misses school so much she cries whenever he mentions the word. a lot of people i've met here seem close to the edge, but they will do as they've always done and manage to hold it together. pakistan's poor have long known not to expect much from anyone. >> woodruff: the united nations has appealed for more than $2 billion of flood aid for pakistan but has received only 620 million so far from member nations.

>> brown: again, the major developments of the day: president obama wound up a four- state campaign swing to rev up supporters for the midterm elections just five weeks away. a wave of labor protests swept austerity plans. a wave of labor protests swept across europe against government austerity plans. and security was beefed up in paris, london and other european cities after authorities warned of an ongoing terror plot. and to hari sreenivasan, in our newsroom, for what's on the "newshour" online. hari? >> sreenivasan: you can watch all our tax cut conversations on "the exchange," our page for economic news and analysis. on our politics page, political editor david chalian looks at the three-way scramble in florida's senate contest. plus, on "the rundown," a look at newly published letters from francis crick, one of the scientists who uncovered the structure of dna. they offer insights into the landmark 1953 discovery. all that and more is on our web site, newshour.pbs.org.

>> woodruff: and again, to our honor roll of american service personnel killed in the iraq and afghanistan conflicts. we add them as their deaths are made official and photographs become available. here, in silence, are ten more.

>> woodruff: and that's the "newshour" for tonight. on thursday, we'll talk with house speaker nancy pelosi. i'm judy woodruff. >> brown: and i'm jeffrey brown. we'll see you on-line and again here tomorrow evening. thank you and good night. major funding for the s newshour has been provided by:

and by the alfred p. sloan foundation. supporting science, technology, and improved economic performance and financial literacy in the 21st century. and with the ongoing support of these institutions and foundations. and... this program was made possible by the corporation for public broadcasting. and by contributions to your pbs station from viewers like you. thank you.

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